It could cost some US$50 million to construct a 10-megawatt geothermal power plant in St. Vincent and the Grenadines.
Digging the geothermal well could cost between US$6 million and US$8 million, but Iceland-based firm Reykjavik Geothermal says it is prepared to make the investment.
Gunnar Orn Gunnarsson, chief operating officer of Reykjavik Geothermal, speaking in Kingstown last week at the launch of the testing phase of the project, said that the cost of the well will depend on its depth.
He, however, said a geothermal well generally ranges from 1.5 to 2.5 kilometres before the resource needed to generate electricity is reached.
He said other factors contributing to the cost include mobilisation of the drilling rig, but noted that an Icelandic company was in Montserrat at the time and will start drilling in Dominica and hopefully they will be in the region when drilling begins in SVG, if the project gets to that stage.
Meanwhile, Peter Williams, managing director of Light & Power Holdings Ltd., Barbados, a company owned international energy and services company by Emera, said that internationally the price of a geothermal plants range from between US$5 million and US$6 million per megawatt capacity.
This country is hoping to produce 10 megawatts of electricity using geothermal energy, which could put the cost in the region of US$50 million.
“That is the order of cost that we are talking about. Obviously, like I said, there has to be some refining,” Williams said at the launching.
“I would like to add that we are working very closely with VINLEC in terms of the cost of interconnection and all the technical requirements,” he further added and spoke highly of the efficiency of the state-owned power company and it capacity to help to integrate a geothermal plant into the existing grid.
“So, when we’re finished drilling, we will know a better definition of what that cost will be. One factor that will influence that overall cost is where it is best located,” Williams further said, noting that the north of St. Vincent, where the volcano is located, does not have extensive road network, and other infrastructure.
And, Gunnarson said that the business model to be used in SVG is the same as in Ethiopia, where they have a contract with that country’s government to build a 1,000-megawatt geothermal plant.
He said that Reykjavik Geothermal needs a certain return on its investment and it will be the same they are aiming at in SVG.
He said that while geothermal energy is similar to hydro in that there is a lot of cash that one has to come up with in the beginning, it is also a risky investment because, unlike hydro, where the water supply can be readily measured, the geothermal resource is not proven until some drilling is done.
Gunnarson, however, said that because of Reykjavik Geothermal’s experience, it is confident that the risk involved in that upfront investment is not that great.
“People with no background in this will look at it as a great risk. But because we have the understanding, the knowledge and the experience, we don’t do that,” he said.
He said Reykjavik Geothermal’s business model is to be able to have investors and lenders on board.
“To do this, the company needs to have contracts about access to the resource, selling the power to somebody,” Gunnarson further stated, adding that such agreements have to be in place before the company starts spending real money in drilling the power plant.
Lower electricity bill
Gunnarson further said that no government will sign a contract for the generation of geothermal energy if the cost of that energy will be higher than electricity that generated using fossil fuel.
But he said that while it is a given that the price of electricity generated by geothermal energy will be lower, they don’t know as yet how much lower it will be.
He further noted that the price of electricity generated using geothermal energy will be stable for a long period of time, because it is not subject to the fluctuating price of oil.
There is energy security, in that the country is producing its own energy, Gunnarson further added.
“I think it is a price issue, it is a stability issue, and it is an energy policy issue that you would gain by having geothermal energy,” he further said.
And, Prime Minister Dr. Ralph Gonsalves said that all indicators suggest that geothermal energy production will be beneficial in the short and long term, adding that the cost of production of that energy will remain stable for a long time.